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Oil prices rose slightly on Tuesday amid concerns that tension in the Middle East could disrupt supplies, but uncertainty about the pace of potential US interest rate cuts and the impact on fuel demand limited gains.
By 0420 GMT, Brent crude futures rose seven cents, or 0.1 percent, to $82.07 per barrel. US West Texas Intermediate crude rose 10 cents, or 0.1 percent, to $77.02 a barrel.
Oil prices were almost stable in trading on Monday, after rising six percent last week.
Conflict in the Middle East kept prices high.
On Monday, the Iran-aligned Houthis in Yemen fired two missiles at a cargo ship heading to Iran in the Red Sea. The group has been attacking international ships with trade relations with the United States, Britain and Israel since mid-November in solidarity with the Palestinians, while Israel is waging war on Hamas in the Gaza Strip.
The United States’ move to tighten or enhance the implementation of sanctions on Iran would affect oil market supplies.
But concerns about interest rates limited oil’s gains. The Federal Reserve Bank of New York said its survey of consumer expectations for January showed that inflation expectations one and five years from now remained unchanged, with both remaining above the Federal Reserve’s target rate of 2 percent.
If concerns about inflation delay the US Federal Reserve’s interest rate cuts, this could reduce demand for oil by slowing economic growth.
US inflation data is expected on Tuesday, while euro zone inflation and GDP data are scheduled for Wednesday.
Market participants are also awaiting sector data on US crude inventories, scheduled to be released later on Tuesday.
The Organization of the Petroleum Exporting Countries (OPEC) is also scheduled to issue its monthly oil market report on Tuesday. OPEC member Iraq said on Monday that it is committed to the organization’s decisions and not to produce more than four million barrels per day.
“What will be most interesting in the coming weeks is what OPEC+ decides to do regarding the voluntary supply cuts that expire at the end of March,” ING analysts said in a note on Tuesday.
They added, “Our budget indicates that the market will have a surplus in the second quarter of 2024 if the group does not extend part of these cuts.”
The OPEC+ group, which includes OPEC and allies including Russia, will decide in March whether to extend voluntary oil production cuts in place in the first quarter.
In November, OPEC+ agreed to voluntary production cuts totaling about 2.2 million barrels per day for the first quarter of this year, led by Saudi Arabia, with a voluntary reduction of one million barrels per day.
